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The Van Westendorp Price Sensitivity Meter (PSM) PDF Print E-mail

PSM is one of the widely used techniques among market researchers. In PSM method, a probability sample is presented with the description of a product/service and is then asked four basic questions: 1) “At what price would you consider the product to be so inexpensive that you would doubt its quality, and would not consider buying it or recommending it to others?” 2) “At what price would you consider the product to be inexpensive, and you would consider the price to be a good bargain?” 3) “At what price would you consider the product to be getting expensive, but you would still consider the price to be acceptable?” and 4) “At what price would you consider the product too expensive, and you would not consider the price to be acceptable?” The PSM method provides firms with a range of demand functions that could be used to gain a better understanding of customers’ price elasticity.


This method is better than DPRS, since it starts with a question that reveals a respondent’s lowest base price and forces them to move up. In other words, while DPRS reveals a person’s opening offer, PSM forces them to make 3 additional offers. In practice, this model works much better when coupled and cross-validated with less exploratory models.

 

 
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